How the Gafa coped with the shock of slowing down

Posted on July 30, 2022, 12:00 PMUpdated on July 31, 2022 at 11:53 am

Big tech groups are doing better than expected in the face of a cooling economy. Most of them, with the exception of Meta, the parent company of Facebook, continued to grow in the last quarter, although they slowed down the pace compared to last year. They implemented several strategies to cope with the decline in their income. Review.

1. Cut costs

After hiring thousands of people during the pandemic, big tech groups are changing their strategy this spring. The first to react is also the weakest. This is the case, for example, of Uber, which recorded net losses of 5.9 billion dollars in the first quarter of 2022. The VTC company announced in May that it would lay off 3,700 employees, or 14% of its workforce. .

Amazon, which has been investing to keep up with rising demand during the pandemic, has also been forced to rapidly cut costs. The Seattle-based company reduced the number of employees by 6% between April and June (90,000 fewer jobs). It also seeks to better manage its warehouses, by subletting them to other companies when they do not use all of the space above them.

Meta, whose stock market has slumped since the beginning of the year, is also slowing hiring. Teams working on products that are deemed non-essential will see their workforce shrink. These include Facebook Dating and Gaming (games and dating sites), the children’s messaging app Messenger Kids, as well as Remote Presence, which is trying to create an online video calling service.

Other groups with stronger results have followed recently. Apple, for example, plans to slow growth in hiring and other spending next year. Google, on the other hand, ordered a two-week hiatus in recruitment, the time to evaluate those who are needed or not.

2. Prepare for the future

Despite their current difficulties, Gafa wants to continue investing in areas that will eventually allow them to compete with their rivals. “We will continue to invest in artificial intelligence, our search engines and the cloud,” the CEO of Alphabet, Google’s parent company, told analysts.

Same talk on Mark Zuckerberg’s side. “We want to continue making long-term investments to be stronger from this crisis,” said the boss of Meta. The priorities are the algorithm that helps diversify users’ newsfeeds, the new Reels short video format, advertising products and the metaverse.

On Amazon’s side, that means continuing to invest in warehouses, including a 2.9 million square meter hangar in western New York that will cost the e-commerce giant $550 million. This is the first investment of this size that has been approved since the market downturn.

3. Find new recipes

One of the easiest ways to increase profits in times of crisis is to charge users. Mistreated by the markets after the decline in the number of its users, Netflix resorted to it in March, by increasing the price of subscriptions in the United States.

Meta followed suit by increasing the price of its virtual reality headset by $100, which now costs between $400 and $500 depending on the number of gigabits. As for Amazon, it raised Amazon Prime subscription prices in France, the United Kingdom, Germany, Spain and Italy after raising them in the United States in February.

Another possible strategy is to diversify your income. “Our strategy, at this time, is to expand our portfolio of solutions beyond our core business”, explained a senior Twitter executive to “Echos”. In particular, the platform wants to allow brands to advertise products and events. It is also betting more on e-commerce, by signing a partnership with Shopify for example.

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